XTEP International Q3 Continues To Develop Rapidly, And Multi Brand Extends Its Long-Term Space.

XTEP International (01368) announcement: in the 3 months ended September 30, 2019, group store sales (at retail value) increased by about 10% over the same period last year; retail sales (including online and offline channels) increased by about 20% over the same period last year; retail discount levels ranged from 25% off to 22% off; retail inventory turnover remained at a healthy level for about four months.

　　 viewpoint

Guoxin point of view: 1) the three quarter continued rapid momentum, the industry's leading performance. 2) Jeremy Lin will promote the development of basketball series, and many brands are expected to extend their long-term growth space. 3) risk warning: 1., after the merger, the new brand turns less quickly than expected; 2., the demand for sporting goods is greatly reduced by the macroeconomic impact; 3., the transformation effect is not as good as expected; 4., the systemic risk of the market. 4) investment suggestions: the company's main brand is growing steadily, and many brands extend its long-term space. We maintain the profit forecast. We expect the company's 19-21 net profit to grow by 8.1%/30.9%/15.5% compared with the same period last year, EPS is 0.28/0.37/0.43 yuan respectively, and the current stock price corresponds to 19-21 years PE 17.1x/12.8x/11.1x, respectively. The valuation is significantly lower than that of the interbank company, and the reasonable value is raised to 6.2-6.6 Hong Kong dollar (corresponding to 2020 PE15x-16x, previously 14x), so as to maintain the "buy" rating.

　 comment

1 in the three quarter, the industry continued to develop rapidly.

The company gained 10% of the same store growth and 20% retail sales growth this quarter, which basically continued the good momentum in the first half of the year. Store sales ratio remained healthy for nearly 4 months. Retail discount 7.5-7.8 decreased slightly but remained quite healthy. At present, the main sports brands in China are Anta, XTEP and 31st three, which announced the performance in the 3 quarter. Compared with the growth rate of the main brand, XTEP is relatively in the lead, and also has outstanding performance in inventory and discount. Since the beginning of this year, the company's solid brand performance has been better than that of last year's transformation.

　 2 Jeremy Lin will promote the development of basketball series. Many brands are expected to extend their long-term growth space.

Signing Jeremy Lin is expected to promote basketball category, initially showing a good momentum. In August this year, the company signed a brand spokesperson, Jeremy Lin, to raise the basketball market. Jeremy Lin joined CBA Beijing Shougang Group this year. The company will create a series of signature basketball shoes for Jeremy Lin. At present, XTEP's color matching basketball shoes for Jeremy Lin have already appeared in the October CBA pre-season match, while Jeremy Lin's first match won 40 points, attracting high attention for XTEP basketball shoes, showing a good momentum initially. In the future, the company is expected to acquire new growth points in basketball professional products and life fashion categories through further cooperation with Jeremy Lin.

The multi brand matrix is initially formed, expanding the consumption level and subdivision coverage. At present, XTEP has joined hands with Wolverine to set up a joint venture to operate Saucony and Merrell brands in Greater China, covering high-end running shoes and outdoor areas. At the same time, the company acquired the global business of K-Swiss and Palladium brand, covering high-end fashion sports market. It is estimated that in the next two years, the Saucony and Merrell brands of the joint venture will turn into a profit and loss balance from the loss of about 20 million yuan, while the acquisition of K-Swiss and Palladium brands will result in a one-time profit of about 100 million yuan this year, which is expected to break even next year. From the next 3-5 years, the new brand will gradually contribute to the company's important profits through hatching and opening stores.

3, the main brand is growing steadily, and many brands extend their long-term space to maintain the "buy" rating.

The company performed well in the three quarter, and other leading companies in the industry are also in a highly prosperous trend. Future Ltd's main brand is expected to maintain a relatively fast growth. In terms of new brands, this year's acquisition will result in a profit of about 100 million yuan, and 2-3 years will gradually contribute to profits after a certain incubation period. We maintain our earnings forecasts. We expect the company's 19-21 net profit to grow by 8.1%/30.9%/15.5% compared to the same period last year, EPS is 0.28/0.37/0.43 yuan respectively, and the current share price corresponds to 19-21 years PE 17.1x/12.8x/11.1x, respectively. The valuation is significantly lower than that of the interbank companies, and the reasonable valuation is HK $2020 (corresponding to 2020 PE15x-16x, previously 14x), maintaining the "buy" rating.